Sizing Up APIs: the Right Piece to Solve a Treasury Data Puzzle?

By November 3, 2022No Comments

APIs offer flexible connectivity between systems, but widespread adoption by treasury faces several obstacles.

Treasury organizations are hungry for data, but visibility into it is hampered by a fractured system environment and lack of standardization, both within finance and with external partners. Short of implementing a single ERP with built-in modules, finding a way to access enterprise information on a real-time basis has been difficult for often resource-starved treasury organizations.

A new bridge for data. While complete system consolidation is not realistic, there are ways to mimic integration by implementing new technologies—by using APIs, for example. APIs can deliver flexible connectivity with other internal systems and external providers, like banks. They are a modern take on middleware, without all the technical debt and hard-coded flows. Banks have been using APIs in the retail market successfully, e.g., to offer 24/7 access to account information. However, each bank has its own set of APIs, designed to enhance customer “stickiness.”

On the commercial side, banks have pursued a similar strategy with a similar objective. However, the lack of standardization has slowed down corporate adoption significantly. Only 16% of respondents to NeuGroup’s recent Cash Forecasting Survey report using bank APIs.

  • Treasury does not typically have the technology resources to build user interfaces with multiple APIs.
  • Another obstacle is the debate about the value of real-time bank information. “If you are not going to make a decision based on it, why do you need it?” said a member at a NeuGroup for Retail Treasury meeting, hosted by Starbucks and sponsored by FinLync.
  • Plus, companies already using a treasury management system (TMS) wonder about the upside. A TMS can be programed to pull account information directly from bank portals, saving treasuries hours of data collection. “Why fix something if it’s not broken?” asked another member.

Owning the cadence. The benefit of APIs is that the company controls the frequency of data uploads. “It’s no longer the banks pushing your files, pushing payments or taxes,” said Tim Kane, head of sales at FinLync. With APIs, corporates can get real-time information on demand and then make decisions based on it.

  • “With legacy file formats, you’re essentially always playing catch-up, trying to get timely information based on the schedule that a predecessor agreed upon years ago,” Mr. Kane said.

Getting IT bandwidth. Even companies eager to implement bank APIs are facing major obstacles. Treasury is not first in line for IT investment. Plus, IT organizations are often focused on modernizing the broader finance and enterprise tech architecture. A panel discussion at the meeting offered pointers on how to get the CFO’s buy-in for allocating IT investment.

  • “If we can remove legacy technology debt by using APIs by getting rid of some of this old middleware, then treasury can get more help from IT to install new technologies to make it more efficient,” said the former treasurer of a major technology company who is now a managing director at JPMorgan Chase.
  • A senior director of treasury who participated in the panel recommended that treasury overcome limited IT resource challenges by attaching API implementations to larger technology upgrades, e.g., the roll-out of a new ERP.

Considering the cost. Convincing management to allocate funds also depends on whether the APIs can reduce treasury cost. The answer, according to this treasury director, is “it depends.”

  • Her bank does not charge for so-called front-end data calls because corporate clients are already paying for back-end services, such as accounts management and various treasury solutions.
  • Pricing can vary from bank to bank, similar to API formats, as institutions compete to gain market share in this new area.
  • In addition, replacing antiquated middleware with APIs can be an enormous cost-saver. For example, APIs’ connectivity takes away the need for lengthy calls with banks about missed payments or data.

Even API proponents agree that banks are unlikely to standardize their APIs any time soon. But that does not mean treasurers give up. Instead, they should put pressure on their banks to collaborate with each other and develop common APIs that would promote widespread adoption, reducing costs and facilitating the flow of information.

Justin Jones

Author Justin Jones

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